Thinking about buying your first house? It’s a big deal! You’re probably wondering, “How much money do I really need to buy a house?” Tyler Wilkinson, a real estate broker and attorney at Potterton Rule Real Estate, is here to help. He’ll explain all the costs you need to know about, both when you first buy and each month after. Knowing these costs will help you feel ready to buy your own home!
Two Types of Costs to Think About
When you’re saving up for a house, remember there are two main kinds of costs:
- Money You Pay Right Away (Up-Front Costs): This is the money you need to have when you buy the house.
- Money You Pay Every Month (Monthly Payments): This is what you pay each month after you own the house.
Let’s break down each one.
Up-Front Costs: Money You Pay at the Start
These costs are what you pay before you get to move into your new place. They include fees for people helping you, closing costs, and your down payment.
1. Fees for Helpers
These are payments for the people who help you buy your house:
- Home Inspector: This person checks the house to see if anything is broken or needs fixing. This helps you know if there are any problems before you buy.
- Appraiser: This person figures out how much the house is really worth. This helps the bank decide if they will give you a loan and makes sure you aren’t paying too much.
- Insurance Agent: This person helps you get insurance for your house, in case something bad happens, like a fire.
- Real Estate Agent: A real estate agent, like the people at Potterton Rule Real Estate, helps you find a house, make an offer, and deal with all the paperwork. They get paid a commission, which is either a set fee or a percentage of the house price. You talk to your agent about how they get paid.
You pay these helpers either before you close on the house or when you close.
2. Closing Costs
Closing costs are fees for the bank and the title company to help you officially buy the house. These costs can include:
- Loan Fee (Origination Fee): This is a fee you pay to the bank for setting up your home loan.
- Small Loan Fees: These are for little things the bank needs to do, like checking if the house is in a flood zone or looking at your taxes.
- Title Company Fee (Closing Fee): This fee pays the title company for putting all the closing papers together.
- Title Insurance for the Bank: This insurance protects the bank if there’s a problem with who really owns the house.
- Money for Taxes, Insurance, and Interest: The bank might want you to pay some property taxes, house insurance, and loan interest ahead of time. This money is kept in a special account called “escrow.” This is a closing cost that many people forget about!
3. Down Payment
The down payment is the money you pay yourself towards the price of the house. It’s like putting your own money into the deal right away.
- How Much Down Payment? You might pay as little as 0% down or more than 20% down, depending on the type of loan you get.
- Down Payment and Monthly Payments: The amount of your down payment affects how much you borrow and how much you pay each month.
- Example: If you buy a $300,000 house and put 10% down, that’s $30,000 for the down payment.
Monthly Payments: What You Pay After Buying
After you buy the house, you’ll have to make monthly payments. These payments are made up of a few parts:
- Principal: This is the money that goes directly to paying back the loan. The more principal you pay, the more of the house you own.
- Interest: This is the fee you pay to the bank for borrowing money. For example, if you have a $300,000 loan with 5% interest per year, you’ll pay $15,000 in interest that year, or $1,250 each month.
- Private Mortgage Insurance (PMI): If you don’t put down at least 20% on the house, the bank might make you pay PMI. This insurance protects the bank if you stop making payments.
- Escrow for Taxes and Insurance: The bank will likely want you to pay money each month into that escrow account to cover your property taxes and house insurance. If your property taxes are $6,000 per year, you’ll pay $500 into escrow each month.
All these parts together – principal, interest, PMI, and escrow – make up your total monthly house payment.
Other Monthly Bills to Remember!
Don’t forget about other bills you’ll have to pay each month when you own a house:
- Utilities: You’ll need to pay for things like gas, electricity, water, sewer, and trash pick-up.
Let Potterton Rule Real Estate Help You Plan
Buying a house costs money, but it’s not impossible! A good real estate agent can help you make a plan for all the costs. At Potterton Rule Real Estate, we can help you:
- Figure out a budget for all the costs of buying a house.
- Make sure you’re ready to pay for a house each month.
- Remember to save money for fixing up and taking care of your house.
Buying a house can be easier with help. Contact Potterton Rule Real Estate today and talk to one of our friendly agents! Check out our other videos to learn even more about buying and selling houses in Wisconsin!
We look forward to helping you find your perfect home!